Weekly Forecast: Traders to Focus on US and EU Inflation data

This week, it is expected traders will continue to focus on the tariffs that were initiated by the Trump administration on Thursday last week. Over the weekend, American allies such as the European Union, Japan, and South Korea held a meeting with the United States’ trade representative, Robert Lighthizer seeking exemptions from the tariffs. They argued that the tariffs would usher in a trade war where no country will benefit.

Already, the tariffs have introduced a new paradigm in the United States. Republican senators, who had warned Trump against the tariffs have started thinking about creating a law to prevent them from going into effect. On the other hand, some democrats such as Elizabeth Warren have welcomed the tariffs.

The implications of a trade war could be dire. The reason why the world’s markets have surged recently is that traders hope that the GDP growth could help boost the world economies. As such, a sign that the GDP growth will not be as expected could have significant implications on the stocks markets.

Another major issue to be focused on this week will be the US inflation numbers. Tomorrow, the Bureau of Labor Statistics will release the CPI numbers. The release will be very important because it may help guide traders about the pace of the future interest rates.

Traders expect the data to show that last month’s inflation rose at 0.2%, a point lower than the 0.3% reported last month. They expect the rate to remain at 1.8%, which is slightly lower than the Fed’s target of 2.0%. In the last Fed’s meeting, the officials sounded more hawkish and predicted four hikes this year. A weakness could mean less rate hikes.

In the United States, we will also receive the retail sales for the month of February. Traders expect the retail sales and core retail sales to have grown by 0.3% in the month. We will also receive the manufacturing data, JOLTS job openings data, and housing data.

On Wednesday, we will get the industrial production data from China. This data is closely watched because of the importance of China to the global environmental. It is the world’s biggest consumer and producer of items. Therefore, a weakness in the industrial performance could mean shockwaves in the global financial markets. Traders expect the performance to increase from last month’s 6.2% to 6.3%.

On Friday, we will receive inflation data from the European Union, which has been a strong performer. Traders could closely pay attention to the data because it may help predict the pace of future rate hikes and the ECB stimulus package. The data will come after the ECB left interest rates unchanged. Traders expect the CPI to remain at 1.0%. On an annualized rate, they expect the inflation to grow by 1.2%. They also expect wages to grow by 1.8% from last month’s 1.6%.

On Thursday, the Swiss National Bank will conclude its two-day monetary policy meeting and announce the interest rate decision. Traders expect the committee to continue its negative interest rates policy due to the weak inflation rate. Recently, the Swiss Franc has fallen by almost 1.50% against the dollar.